Tax Incentives For Employee Wellness Programs

Achieving behavior change with wellness incentives.

Tax incentives for employee wellness programs.

All incentives offered through a wellness program should be reviewed for tax purposes. Wellness program incentives help employees adopt and maintain healthy behaviors for the rest of their lives. Not only is it useful for attracting top talent but healthier employees inevitably lead to lower medical claims costs which leads to lower medical premiums which leads to a better profit margin. To boost engagement most employers offer some sort of incentive to employees for participation.

Law and analysis section 61 a 1 of the internal revenue code and 1 61 21 a 3 of the income tax. If you offer employees wellness programs such as fitness centers nutrition counselling and stress reduction and you charge little or nothing or even offer financial incentives surely it will improve the participants health. Wellness program includes a reimbursement of all or a portion of the required employee contribution for the wellness plan that the employee made through salary reduction. The benefits of workplace wellness programs are endless.

The irs recently issued a chief council advice cca tax memorandum that addressed confusion over the taxation of incentives for participating in worksite wellness programs. In most cases unless motivated most employees will have a hard time making healthy lifestyle changes. While there is controversy about wellness incentives and if they actually work 75 of wellness programs do include incentives to encourage participation. Incentives are generally subject to tax unless 1 given as a premium credit 2 deposited into an fsa hsa hra or 3 are prizes of nominal value e g pens or t shirts.

States including massachusetts indiana and mississippi have considered or implemented tax credits to incentivize small businesses to provide employee wellness programs. Wellness programs can be tax free to an employee. For wellness programs that are not subject to the ada or gina see examples above an employer could still offer incentives penalties of 30 or more in some cases e g 50 for tobacco cessation programs that do not test for the presence of nicotine or unlimited amounts for programs that only require participation but not attainment of a. Simpler is always better.

People also ask these wellness questions. It seems like a question that s not worth asking. A wellness program is a workplace program intended to improve and promote health and fitness in which an employer typically offers premium discounts cash rewards gym memberships or other incentives to participate. This is where incentives can help.

Small business owners may be able to take advantage of tax incentives for workplace wellness programs.